Canada’s booming cannabis sector absorbs the CRE market

Canada’s booming cannabis sector absorbs the CRE market

The booming cannabis sector in Canada is going to take away land from the real estate market. According to Health Canada, the latest data suggest that there are 113 licenses for marijuana cultivation in the country, including sixty-one in Ontario, 24 in B.C. while the rest are spread across other provinces. As of Oct. 17, the Canadian government has more than 500 marijuana cultivation license applications.

Implications of the cannabis sector for real estate

According to Commercial property firm JLL estimates, the eight largest cannabis companies can take away eight million square feet of industrial space within the next two years. This can have serious implications for the real estate market.

There are serious concerns, especially about the outdoors cultivation operations. They will gobble up a lot of farmland.

Bluevault, a B.C.-based grower is going to grow cannabis on a 135-acre organic farm. The owner of the company, Martin Mullany, will produce CBD oil extract from cannabis for the medicinal market.

“My focus is more on the CBD side, not the THC side,” he said, saying
cannabis include two chemical compounds that can be used as medicine,
mainly valued for therapeutic uses.

Thinking about the high valuations put on the cannabis sector, one may wonder how much more land it can occupy, taking it away from the real estate market. A lot of companies are on the stock exchange and have big access to capital.

“These companies are becoming massive publicly traded firms that are
traded in the Canadian stock exchange but also in the U.S., so they have
access to capital to fund their vision,” Dan Rowland, a Denver-based
cannabis industry consultant, said.

Landlords are resisting

“Some landlords said no. We’re not allowing a cannabis facility into one of our buildings’,” Rowland said.

Maybe some still have the stigma of cannabis being illegal, “but that’s changing,” the consultant said.

The landlords are also concerned about what might happen with all these properties when they become no longer financially viable as a cannabis business. This may cause oversupply and contraction in the market.

“People didn’t realize which way it was going to turn, how quickly this industry has turned, and how many people are getting involved. Business is business,” the consultant said noting that the certainty right now is that as the sector evolves, things are going to change.